2016 Charger R/T Scat Pack

[Bob]

This would be a good time for Bob to chime in. Certain cars are actually a better deal new because of their good resale value on lightly used examples.

I thought the Prius fell into this category until $27 oil happened... Oh well, I probably spent more on diapers than I did on gas in 2015.

I would say that for most cars, lightly used is the way to go, but there are exceptions out there, usually on moderately priced Japanese cars that don't depreciate much in the first couple years. My rule of thumb is to try to buy and sell in the flat part of the depreciation curve.

My Elise is a great example of not waiting until something depreciates to $XXX paying off. I bought it in 2006 for roughly $35k, which was not an insignificant amount of money to me at the time. When I got it, it had 3200 miles on it and had been owned by the original owner for about 6 months. I let him take roughly a $13-15k hit then I swooped in. I got a tremendous amount enjoyment out of the car the first few years I had it when I was young, single and lived closer to the mountains. Fortunately for me, the resale value is now increasing due to limited supply and the fact that you'll never be able to buy a new car like this in America again. If I were to sell the car today, it would probably sell in the high 20s. Even if the car was worth $10k today, I would still feel like I got my money's worth. I guess the moral of the story is buy what you want and enjoy it. As long as you are somewhat smart about it and avoid major resale liabilities, you'll be fine. Also, keeping cars for longer periods of time helps to spread out the depreciation.

[kevm14]

I would say that for most cars, lightly used is the way to go, but there are exceptions out there, usually on moderately priced Japanese cars that don't depreciate much in the first couple years. My rule of thumb is to try to buy and sell in the flat part of the depreciation curve.

You've done fairly well with this formula, and at the time I think it made sense for what you wanted to drive, since you tend to default to first model years. For me, since I don't want to put that much cash into something (even if you can make an argument that I'll get it back - it is a function of my disposable income), the 5-7 year range for something that sold in the low $50k range allows me to drive something nice. Yes they will have about 100k on them but that is more than offset by the depreciated purchase price imo, since I do my own work.

If I don't think I can afford to maintain it after 100k, I wouldn't buy it. If I thought at 100k, the car would be hopelessly worn out, and not financially feasible to make it drive like new, I wouldn't buy it. That is implicit in all of my car-buying decisions. Both my CTS-V and SRX essentially drive like new. Neither are recommended by Consumer Reports.

Now that is my formula for the most expensive cars I've ever purchased. I find that there is great value to be had at every $1,000 below those, too.

[bill25]

even if you can make an argument that I'll get it back - it is a function of my disposable income

Not if you finance. You can potentially finance a 15K car, and drive it for a few years and sell it for 12K, If you get a decent deal. So you essentially paid 3K to drive a car for a few years and didn't touch your dispensable income. Why wouldn't you leverage this option?

Here is an example: I bought my 3 for 15,500, paid it off over 5 years and had say 80K on it. If I did it right, I could have sold it for between 9 and 10K. That is 1K per year to drive, and I had a brand new car. Or by your way, I could have bought a 1K car and saved a few hundred a month for 5 years, if I didn't need a new car to replace the 1K car, and the repairs etc. Instead I drove a new car with no headaches. I could have done it better if I got a car used like 3 years old and sold it after 5 years. I am just saying, you keep saying that 35K is too much to pay for a car, you don't pay 35K if you finance 35K, and sell it for 25K 5 years later which is what the Gen 5 Camaro has done.

You have to be smart and pick the right cars based on resale value, but with low interest financing, I don't see why you would not leverage the bank rather than impact your disposable cash.

[kevm14]

There aren't a lot of cars I am interested in that have good resale. This is not really a coincidence.

I'd rather pay $15k cash for a much nicer used car than finance $15k for a new one. Financing is harder and less compelling on 5+ year old used cars, which is where the cash part comes in.

[bill25]

I am not advocating a particular newness or car, I am just saying that you aren't stuck looking at 2K cars. There are a lot of options. You could finance a Caprice PPV for 10K with low mileage and drive it for a couple years and probably sell it for 7 to 9K without taking 10K out of the bank. I agree that a lot of the cars that this would work for would not be appealing to us, because I don't want a Honda Accord or a Toyota Camry, but if you find something where most of the initial depreciation has already happened, you don't need to find one for 2K. I am sure you could get a good loan for 12K on a used car. If I am wrong about that, then yeah, you would be stuck with a high monthly payment on a 4 year old loan. We financed the RAV. I think I put 1K down and paid the taxes and registration. The interest is like 2%. It was like $15,500, new they are like 23 or 24K for AWD. I think we will do ok with this. If we keep it for 5 years, it will be paid off and I would hope to get 8 to 10K for it. That means I paid 1K per year to drive it. The alternative would have been to buy a 2K car which I guarantee would not have the peace of mind that this has. So with my argument from the beginning, if I pay 1K a year to have this, that is less than the gas and insurance to drive it. Doesn't seem that ridiculous to me. I would rather have the monthly payment than take that kind of money out of the bank and have it tied up in the RAV.

[bill25]

Financing is harder and less compelling on 5+ year old used cars, which is where the cash part comes in.

I am not sure how true this is. You have good credit. I bet Navy Fed would give you a good loan. I am not sure their cutoff point is for car age though.

I don't think we have discussed the Scat Pack for a while now. Damn GM for not giving this competition.

[kevm14]

Financing is harder and less compelling on 5+ year old used cars, which is where the cash part comes in.

I am not sure how true this is. You have good credit. I bet Navy Fed would give you a good loan. I am not sure their cutoff point is for car age though.

https://www.navyfederal.org/products-se ... -rates.php

You can see how the rates go up substantially as you add loan term on top of a used car. That said, their definition of a used car in that table is simply one with more than 30k miles on it that is less than 20 years old.

So my favorite example of 5 year old used car for $15k would qualify for 3.6% on a 3 year loan, 4% on a 5 year loan or 5.9% on a (ridiculous) 6 year loan.

If I really was earning better than a 3.6% return on some capital, I could justify the loan on a 3 year term. Otherwise, I could not. For enthusiast purposes, I want to own the car. If it was an appliance, then...I'm not interested in the first place.

[kevm14]

I am not advocating a particular newness or car, I am just saying that you aren't stuck looking at 2K cars. There are a lot of options. You could finance a Caprice PPV for 10K with low mileage and drive it for a couple years and probably sell it for 7 to 9K without taking 10K out of the bank.

You, nor I, have any data at all to suggest that this would be the case. It COULD be the case if GM doesn't actually build a replacement. Maybe it's a matter of principle, but I think it's dumb to be underwater on a car loan. So I would never base a car buying decision on the hope that I could turn the car around for almost what I paid, somehow justifying the payment. Just a bad road that I won't go down.

I agree that a lot of the cars that this would work for would not be appealing to us, because I don't want a Honda Accord or a Toyota Camry, but if you find something where most of the initial depreciation has already happened, you don't need to find one for 2K. I am sure you could get a good loan for 12K on a used car. If I am wrong about that, then yeah, you would be stuck with a high monthly payment on a 4 year old loan. We financed the RAV. I think I put 1K down and paid the taxes and registration. The interest is like 2%. It was like $15,500, new they are like 23 or 24K for AWD. I think we will do ok with this. If we keep it for 5 years, it will be paid off and I would hope to get 8 to 10K for it. That means I paid 1K per year to drive it. The alternative would have been to buy a 2K car which I guarantee would not have the peace of mind that this has. So with my argument from the beginning, if I pay 1K a year to have this, that is less than the gas and insurance to drive it. Doesn't seem that ridiculous to me. I would rather have the monthly payment than take that kind of money out of the bank and have it tied up in the RAV.

Generally what you are talking about applies to Japanese appliance cars, which is so far from my preferences that it's not worth discussing.

There's something about a car payment that just makes me feel dirty. I say that hypothetically as I have never had one. I guess I prefer to save up ahead of the purchase and use the cash to buy what I can afford. Again, if you didn't have the cash in reserve, I'd argue you couldn't afford the car. If you can afford payments, you can save money. And that last sentence is where most Americans totally fail. Being able to afford a payment but not being able to save money is similar to people who insist on a $5k, $8k or $10k tax refund. If you lived without the money all year, you could have changed your W-4 and afforded to SAVE that money (and actually, gasp, invest it at greater than the 0% that the gov't gives you). But I digress...

[kevm14]

Scat Pack content: Lots of performance for $41k. Still not worth getting a car loan over, in my opinion. YOLO notwithstanding.

[bill25]

if you didn't have the cash in reserve, I'd argue you couldn't afford the car.

You have said this more than once but it is not true. I have had a car loan on the Corolla, 3, and RAV4 and have never missed a payment or been able to buy these outright. That right there is proof that I could afford them just because I couldn't buy them outright. People need to drive today to get to their job, not 3 years from now. The Corolla and 3 were purchases that required loans because it was the only way to get out of the car disaster I was in. In the Corolla situation, after getting rid of the Volvo, I would have had to work without a car to pay off 2 Grand before I could continue working, while in college mind you, not sure how I would get there either all of this time, then save another 3K and buy a 15 year old car? No, I bought the Corolla, had $200 payments a month which I easily afforded, and still have the car and have been driving it for free for 5 years now. When I bought the 3, I didn't have 15,500 in the bank, but paid that off at 2 or 3 percent, and drive that for free. It has 100,000 on it, and probably 100,00 more to go.

That is like: well you couldn't buy the house outright, so you can't afford the house. Same argument, just more extreme. Still not true.